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Understanding Bid Factors

The PeopleSoft Strategic Sourcing bid factor function enables you to evaluate events based on factors such as price, warranties offered, lead time, and product quality. Bid factors are questions bidders must answer about their products, services, or company.

You set weightings for each bid factor, letting bidders know how much value you give to that portion of their bid. Price is by default the first bid factor of any buy or sell event. It is required for auction events, and you set a weighting for it. In some events, price might be the most important consideration, so you give it a 70 percent weighting. Or the color of the product might be so significant that you give it a 50 percent weighting.

If the event is an auction, bid factors of type text cannot be weighted. This is because no method is available to automatically score answers that are given in text (for example, answers to a bid factor that says, "Describe your quality processes"). PeopleSoft Strategic Sourcing automatically assigns this a weight of zero, enabling you to collect this useful information without affecting bid scoring. If the event is an RFx (request for quote) or RFI (request for information) event, you can manually score text responses during bid analysis.

You can also create bid factors that you do not display to the bidders, but instead answer during the analysis of the bids. These bid factors can be for subjective responses such as current business relationship or interview results.

You, the creator, can see the scores and can even edit the weighting percentages of the bid factors to consider what-if scenarios for RFx and RFI events.

You can also create bid factor groups that contain multiple bid factors. When you add a bid factor group to an event, the system automatically assigns the bid factors that are assigned to that group to the event.

This section discusses:

Header Bid Factors vs. Line Bid Factors

Header bid factors relate to the overall event, whereas line bid factors relate only to the specific line.

Header bid factors cover the entire event. For example:

  • Is this a minority-owned or woman-owned business?

  • In what state is the corporate headquarters located?

  • Is the company ISO certified?

Because for any bid factor you can change such variables as the range for best and worst responses, the ideal response, and bid factor weighting, you can use the same bid factor for the event and for one or more line items. This ensures accurate weighting and responses.

Line bid factors can be set for individual lines. For example:

  • For a sale of sporting goods, color might be an important factor.

    You can set different colors or weightings for a color list bid factor on the line item for tents, backpacks, and hiking boots.

  • You can set ideals and weightings that, for the line item, differ from the same bid factor set in the header.

    For example, suppose that on the header you set a delivery bid factor, with an ideal delivery time of four weeks. You can set, on a line item, a delivery bid factor with an ideal delivery time of six weeks.

Total Cost Modeling

With total cost modeling, you can analyze bids based on three different criteria: lowest price, best score, and lowest total cost. All three methods can be used simultaneously to give you the most information for making the best award decision.

By using this feature, you can designate cost contributions for selected bid factors. Depending on the type of bid factor, costs can be calculated based on the bidder's bid price, the bidder's bid quantity, a predefined cost range, or a user-defined cost. The system can then calculate a cost related to each bidder's response to a bid factor, as well as total line cost and total event cost. This information can then be used either during manual analysis, or by the optimization engine to determine an ideal award.

The following example illustrates how the cost modeling can be used. You are purchasing an item that has a warranty bid factor associated with it. You are asking the bidders to indicate the length of warranty provided for the item, with a range of one year to five years. The longer the warranty period provided, the less your organization will need to pay for maintenance and repair costs. You determine that each extra year of warranty provided saves your organization $50 in maintenance and repair per unit. You can assign this cost to the warranty bid factor so that the total cost for this bid factor will be calculated based on the bidder's response. One bidder may bid $1,000 per unit but only provide a one-year warranty, while another bidder may bid $1,100 per unit but provide a five-year warranty. Even though the first bidder has a lower bid price, the second bidder will have an overall lower cost because the bidder is providing the full five-year warranty.

When you create a sourcing event, the bid factor cost information appears based on the associated defaulting rules. You can add or modify the cost information.

In addition, any changes made by event collaborators are tracked and can be viewed on the Review Event Collaboration page.

See Understanding Event Collaboration.

For auction events, bidders can compete based on score or price only.

You can also use the optimization feature to determine an ideal award based on minimizing the total cost of the award.

See Understanding Strategic Sourcing Optimization.

Scoring vs. Weighting

Consider these three factors regarding scoring vs. weighting:

  • The score depends on how close the answer to the bid factor comes to the ideal answer.

  • The weighting is based on how important the bid factor is to the overall line or event.

  • The final score is the average of the score and the weighting.

The header and line bid factors are scored separately; each bidder gets two scores. The following table outlines how scores and weighting are used by the system:

Bid Factor

Best/Worst/Ideal

Bidder's Response and Score

Weighting and Score

Header: Is the headquarters located in North America?

Ideal: Yes

Yes = 100 percent

70 percent = 70

(70 percent of the score of 100)

Header: Is the company ISO 9000 certified?

Ideal: Yes

No = 0 percent

30 percent = 0

(30 percent of the score of 0)

Combined header scores.

NA

50

(100 + 0 / 2)

50 is the header score if no weightings are set.

70

(100 percent * 70 percent + (30 percent * 0 percent)

70 is the header score if these weightings are set.

Line: How many pages-per-minute can be processed?

Best: 20

Worst: 1

10 = 50 percent

30 percent = 15

(30 percent of 50)

Line: How many years does the warranty cover?

Best: 10

Worst: 1

8 = 80 percent

70 percent = 56

(70 percent of 80)

Combined line scores.

 

65

(50 + 80 / 2)

65 is the line score if no weightings are set.

71

((50 percent * 30 percent) + (80 percent * 70 percent)).

71 is the line score if these weightings are set.

Line Weighting vs. Bid Factor Weighting

You can set two types of weighting on a line item:

  • The bid factor weighting, meaning how important the bid factor is to an overall event.

    Set bid factor weightings if you want to factor the weightings into the bid scoring.

  • The line item weighting, meaning how important that specific item or service is to the overall event.

    If you do not set specific line weightings, the lines are weighted equally.

For example, in an event to purchase central processing units (CPUs), monitors, and keyboards, the CPUs might be more important to you than the keyboards. You weight the line item for the CPUs at 50 percent, the monitors at 30 percent, and the keyboards at 20 percent.

The following table uses this example. The bidder scores high on bid factors for the line items that have a low line weight. After line weighting is calculated, the bidder's per-line scores decrease:

Example Score with Bid Factor Weightings Calculated

Line Weight

Final Score for Each Line Item

CPU = score of 80

50 percent

40

(80 * 50 percent)

Monitor = score of 90

30 percent

27

(90 * 30 percent)

Keyboards = score of 100

20 percent

20

(100 * 20 percent)

   

87

(Total combined line score)

Default Rule Assignment

You can create default rules for bid factors and bid factor groups. Default rules can be for header or line bid factors. For example, if you have a line bid factor group default rule called Apparel, and you assign an item ID of 10006 to this rule, the bid factor group Apparel always appears by default on any event line containing the item 10006.

You can default bid factors and bid factor groups based on item categories, item IDs, start price, extended price, and event quantities. Bid factors and groups can be associated with business units or departments to provide additional filtering options.

Ad Hoc Bid Factors

The bid factors that you create on the Bid Factors page are available to use in any of the events.

You can also create ad hoc bid factors, specific to an event, when you create the event. An ad hoc bid factor is valid only for the event in which you create it and is not available for any other events.

Use the Event Bid Factors page to add or edit user-defined response costs for a bid factor.

Required or Ideal Response Designation

You can designate that a response is required for a bid factor. If required, the bidder must enter a response for the specified bid factor before successfully posting a bid.

You can also designate that the ideal or best response is required for a bid factor. The bidder's response must match the specified best or ideal response for the bid to be considered for award.

Price Components

You can break out the price bid factors into related and measurable components, such as material, labor, shipping, and so forth. This enables you to gain a better understanding of what makes up the quoted bid price as well as negotiate on specific price components, thereby increasing your overall negotiation power.

Contract Clauses

Event creators can create sourcing clauses that can be associated with bid factors and these clauses provide additional legal, policy, or other terms to bidders during the bidding process. If a sourcing event is awarded to a contract, those clauses can then be passed onto the awarded contract.

Important! You must have PeopleSoft Supplier Contract Management installed to use this feature.

You can associate contract clauses with bid factors using the Assign Contract Clauses page.

See Assign Contract Clauses Page.

Contract Agreements

You can also map a bid factor to one or more contract agreements. If a sourcing event is awarded to a contract, the bidder's awarded value for each bid factor is passed on to the contract agreement and can be tracked for compliance.

Important! You must have PeopleSoft Supplier Contract Management installed to use this feature.

You can associate contract agreements with bid factors using the Assign Contract Agreements page.

See Assign Contract Agreements Page.

Bid Factor Groups

You can assign multiple bid factors to a bid factor group. The total of the assigned bid factor weightings must equal the weighting of the bid factor group. The system provides the bid factor group weightings first over individual bid factor weightings when providing defaults.

You can select a bid factor group during event creation and all associated bid factors are added to the event. You can also assign bid factor groups to business units and departments.

Automatic Bid Factor Population with Queries

You can associate a bid factor with a specified PeopleSoft query, which automatically populates bid factor responses based on the query results. When a bidder selects to bid on an event, the query that is associated with the bid factor is run and the resulting values are entered in the respective bid factor response fields.

For example, you could have a header bid factor asking whether the bidder is a minority supplier. This information is collected when the bidder registers and is on the supplier record. You can build a query by using the supplier and bidder records, and as part of the bidder event response, the system runs the query and automatically populates the response with the minority supplier information.

You can also extract external supplier information, such as supplier performance, to weight and factor in during bid analysis. You can map a supplier performance bid factor to the Supply Chain Warehouse database or to a Dun and Bradstreet database.

See PeopleTools: PeopleSoft Query